Happy Coconut is one of the 500 price taking firms in selling bottles of coconut juice which
Question:
Happy Coconut is one of the 500 price taking firms in selling bottles of coconut juice which is a perfectly competitive market in Country H. The equilibrium price of coconut juice is $46 per bottle. The following table presents the costs at different output levels for this company.
(a) What are the profit maximizing output quantity and price of Happy Coconut? What is the amount profit (loss) made by the company? Show your workings. Explain briefly.
(b) Based on the given information and your answers in part (a), draw a set of market-firm diagram and label the critical data of price, quantities, average variable cost and average total cost at the profit-maximizing quantity. Clearly indicate the profit (loss) area in your diagram. No explanation is needed.
(c) Suppose there has been a bad harvest of the coconut. Explain how this affects the market of coconut juice and how to make the Happy Coconut suffers from bad time. Explain and illustrate this situation in the same market-firm diagram of part (b).